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Wage Rates and Unemployment Rate

Question

Discuss whether or not a country with high wage rates will have a high unemployment rate.

Category:

Unemployment

Frequently asked question

Preview Answer

I. 🍃Introduction
- Definition of high wages
- Importance of discussing the impact of high wages on the economy

II. Reasons why high wages may have negative effects on the economy
- High cost of production leading to higher prices and inflation
- Low international competitiveness resulting in lower exports and higher imports
- Decrease in net exports leading to lower aggregate demand and cyclical unemployment
- Capital-intensive production leading to structural unemployment

III. Reasons why high wages may have positive effects on the economy
- Motivation for workers leading to higher productivity and demand for labor
- High value capital equipment leading to lower cost per unit
- High consumer spending resulting in higher aggregate demand and demand for workers
- Less voluntary unemployment due to wages rising above benefits
- Higher tax revenue leading to increased government spending on reducing unemployment

IV. 👉Conclusion
- Summary of the positive and negative effects of high wages on the economy
- Importance of finding a balance between high wages and economic growth.

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